And I truly understand that once you understand the fact set of who the customer is that lives inside of the four corners of that property, homeowner or home renter, we need to build trust with them. And as you build trust with them over time by delivering world-class service, innovative solutions and all the nicey nice words that everybody wants to use, you will be able to penetrate their wallet by selling them products and services that they need, not flashy products that we want them to have that they need. We know they need product warranties, things break. We know we need to provide services to improve the installation and delivery of those products to reduce returns, which ultimately improves margin and improves the customer experience.
We know that our homeowners have assets. Their most important asset is their home. We know they need to from time to time unlock value in that home. And whether that’s buying a new one, refinancing one that they have, cashing out or do a cash out refi or just accessing some value that’s been established in the appreciation of their home, so they can pull that money out and reinvest it in their home. Our idea of offering a $20,000 HELOC program is purely made to give that consumer the ability to grab cash from the appreciated asset and reinvest it. But let’s be clear, we expect that consumer to actually reinvest a portion of that in buying the products that they need to decorate, to fulfill the balance of that renovation or expansion. I know confidently that as we merge the rewards program, as we improve the credit card program and we launch these other finer products, including home improvement loans, that we will build that brand over time.
I have not, we have not established any of those revenue metrics or profit contribution expectations in any standard that we have outlined for you today as it relates to achieving profitability by the end of next year or the year after. Our job is to surprise and delight with our penetration on those and we will give you an update on the complexity and the size of that when we believe it’s established a level of materiality.
Curtis Nagle: All right. Thanks very much. Appreciate it.
Operator: Thank you. One moment, please. Our next question comes from the line of Seth Sigman of Barclays. Your line is open.
Seth Sigman: Hey, good morning everyone, and congrats to all on the new roles. My main question is around the pricing strategy, the pricing philosophy, more from a competitive perspective. I guess the term the team used to use in the past was smart value. How do you all feel about that today? How that was executed? What does that actually mean? And as you think about Overstock and Bed Bath, how should they be positioned in the marketplace from a price perspective? And ultimately, what’s the type of work you’re doing right now to ensure that right value proposition? Thank you.
Dave Nielsen: Thanks, Seth. I’m going to speak to the Overstock side of the equation and then I’ll hand it over to Chandra. But I can tell you from Overstock that when you think about Overstock, I don’t want you to think about Overstock circa 2022. I want you to think of Overstock circa 2016, 2017, 2009, get it back into that era where smart value was our opportunity. Think about us as surplus goods. Don’t think about us necessarily as liquidation. Think about us as factory directs, overruns, surplus, as Marcus mentioned, products that you will not find on Bed Bath & Beyond. We will have different assortments on both product categories. We will have more than just home furnishings on the Overstock website. There is a need for this in the market.
There is a need for this among our suppliers, especially after what we’ve just gone through. But there’s always been that need. Nobody ever orders the perfect amount of sofas or nobody ever orders the perfect amount of health and beauty products. There’s always an overrun here or there and an opportunity to price that competitively. So, for us, something that I think is really important with Overstock for you to — for everybody to remember, the Overstock customer is a higher average household income customer. This is a customer who has made a lot of money. They have a high income and they make money by saving money and they love that shopping experience. They love the treasure hunt. They love that thrill of the hunt. They will spend when they see quality at a value.
And that’s primarily what that brand has been built on over the years. When you think of well, how can Overstock drive these high average order sizes that Bed Bath & Beyond can’t, it wasn’t just in furniture that that was capable. We’ve sold $100,000 diamond rings on Overstock in the past, several of them. There are customers looking for that deal and that’s the way we want you to think about Overstock. Chandra?
Chandra Holt: Yeah. Bed Bath & Beyond pricing is pretty straightforward. So, we try to be competitive with the main competitors in our space in the market. And then, our customers love coupons and discounts. And so, we use those levers to drive the business where appropriate.
Seth Sigman: Okay. Thank you for that. And then, I’m just curious with the recent inflection that you’ve seen in the business, can you talk about some of the themes, types of customers, maybe the categories that you’re seeing the improvement? What is working right now?
Dave Nielsen: Yeah. For us, again, the lion’s share of what’s happening right now is Bed Bath & Beyond. And with Bed Bath & Beyond, it’s happening in the core power categories of bedding, bath, kitchen and dining, tabletop, cookware, you name it. These are all really, really important categories for us. We’ll see spikes in furniture and area rugs and home improvement just like this recent Labor Day or President’s Day. However, I will tell you it isn’t at the same average order size as what you would get with Overstock. We have Overstock running as a subdomain right now. If you click on Overstock, you can see the assortment that’s there. Right now, it’s just as a placeholder because we had some 60,000 customers a day clicking on Overstock.
They were keying in on their keyboards and on their cell phones Overstock. We wanted to give them a place so we didn’t let them go cold until we got this launch started. The average order size is $50-plus higher there than what you’ll see on Bed Bath & Beyond. And it’s just that same pricing strategy. There is an opportunity for us with the product categories on Overstock to drive a higher margin and a higher AOV. But Bed Bath & Beyond, Marcus spoke to it, the frequency, we love it. We love how often they’re coming back and we love the frequency in which they’re buying.
Marcus Lemonis: I’ll tell you one thing that we definitely learned as Dave and I over the last couple of months hit the road that Bed Bath & Beyond had a historical relationship with certain vendors in excess of $300 million, $400 million, $500 million a year. And when we studied intently what mistakes we believe Bed Bath & Beyond made in their final days, it was really abandoning the solid brand recognition that large brands like Newell and Cuisinart and a number of other brands had established in the marketplace. And when you went to Bed Bath & Beyond, you expected to see those name brands from Dyson vacuums to Wamsutta sheets. And for some reason, the company thought it was a good idea to part ways with those world-class globally-dominated brands that consumers came to expect and understand.
The balance in any business like that is to have a perfect balance between well-recognizable brands that gives the customer the understanding that you are a credible retailer and weaving in own brands that give you the margin expansion you need to hit the levels of profitability. But that’s a very fine balance. And when I started looking to hire a CEO for this business, I said to the Board, we need to find somebody that doesn’t think like this. We need to find somebody that has actually done it. And so, when we went out and we’re blessed to find someone at Chandra’s caliber to be the CEO of Bed Bath. If you look back at her previous relationships and her previous post, she had not only executed, but every channel check that I did prior to bringing her on was not just with the people that she worked with, it was the vendors that she had relationships with.
That for me was the gating principle of understanding. Does Chandra or does this candidate understand the importance of putting those world-class brands up on a pedestal, and then understanding through her experience of creating private labels at all those companies, how to underpin that, how to support it as a foundational piece just to prop up the overall margin, that really is a simple thing. And many people have said to me, “Is Bed Bath & Beyond going to have stores again?” I will tell you as clear as I can, I have no idea as I sit here today. I have a feeling because Chandra has mentioned it two or three times that being in the retail business is an omnichannel experience. I’d like you to expand on that a little bit.
Chandra Holt: Yeah. Right now, within both e-commerce and brick-and-mortar, there’s white space for a category pillar to come in, in bed, bath, kitchen, dining, the categories of Bed Bath & Beyond has always been dominant in. And we — when we look at how our customers want to shop, we think there’s an opportunity to serve them in multiple ways. So right now, we’re serving them from an e-commerce standpoint. But should we look at some brick-and-mortar presence? Right now, I think everything is on the table.
Marcus Lemonis: Yeah. Let me be clear about sort of timeframes around that. This company is sitting with a relatively meaningful amount of cash and no debt other than the building that we’re currently in the process of selling. Every dollar that we have in the bank, we think about as our last dollar. And there will be no material CapEx investments made of any kind until we have reestablished a level of profitability that is sustained. I want to really be clear. And if there is an opportunity to license the brand to somebody internationally, like we already have today in Mexico, we will explore those. In fact, Dave is heading over to Dubai here next week…
Dave Nielsen: Next week.
Marcus Lemonis: …from an inbound call of somebody that wants to open up Bed Bath & Beyond stores in the UAE. We’re open to all those things. But I would expect that we will explore partnerships, shop-in-shop opportunities and things that are CapEx-light and brand-centric around how we want to build it. But I don’t want anybody to leave this call thinking that we’re going to start opening stores tomorrow, next week or even next year. That is not on the runway. We just don’t want people to think that we are limiting the growth potential of this business. We are open to lots of ideas, including acquisitions of other companies, where maybe a Bed Bath can integrate or a variety of other things.
Seth Sigman: Thank you all, and best of luck.
Operator: Thank you. One moment, please. Our next question comes from the line of Steven Forbes of Guggenheim. Your line is open.
Steven Forbes: Good morning, everyone. Marcus, I realize you had mentioned working on improving the customer segmentation data, but given the ramp in 4Q orders and obviously the revenue goals for the year, any update on the mix of orders between the customer groups that we can help contextualize? And any sort of early learnings around repeat behavior differences among those groups that are worth — is worth highlighting?
Dave Nielsen: On the third quarter earnings call, Steven, we talked about the legacy Overstock customers, which were customers who had purchased on Overstock and also purchased on Bed Bath & Beyond, the legacy Bed Bath & Beyond customers and then TAM New. For the fourth quarter relatively similar performance among all three groups. In fact, maybe a little bit more improvement and a willingness on the TAM New customer segment to lean into some of the higher price point categories in furniture and area rugs. But for the most part, the Overstock customer stayed about right where they were from a repeat function. The Bed Bath & Beyond customer, as I mentioned, we had a higher repeat frequency among those customers in the fourth quarter and that had a lot to do with, I believe, what Marcus was just touching on and what Chandra is here to do and that is reestablish these powerhouse world-class brands on Bed Bath & Beyond.
With even taking it to the next level, having unique collaborations with some of these major brands where we have something unique on our website that brings people to Bed Bath & Beyond. And getting back in those businesses, it took us a little bit of time in the third quarter to get those up and running with those world-class brands. By the fourth quarter, that’s where we’ve seen some of the momentum and it’s carried on into the first quarter, as I mentioned in those key categories.
Marcus Lemonis: Look, the Overstock customer was coming to the website and asking who moved. I mean, they literally typed in the word Overstock and they came to the site and it was gone, entirely gone. It’s like you’re being invited to a party and then finding out that you had the wrong address. And I think the challenge with that is, is that we lost short-term credibility. When that website, when that sub domain got popped up really as a reaction to what I think Dave and I believe was just a mistake. We were seeing business on a daily basis $200,000 $225,000 with no marketing, no anything. Trying to get people to buy something from a business that is intuitively not correct is cost prohibitive. And we don’t have an infinite amount of our shareholders’ cash to spend on that, which is why we’ve pivoted so hard and so quickly because we need to hit that $2 billion revenue and we know Overstock is the path forward.
Steven Forbes: Thank you for that. And just a quick follow-up, more of a clarification. Marcus, I believe you stated that the goal is to sort of improve the marketing expense ratio by 50 basis points to 100 basis points per year. I guess, first, can you just confirm that that’s what you mean? And then, what’s sort of the base line? Is it the fourth quarter run rate or the full year 2023 that we should think about that improvement over the next 12 to 24 months?